Paul Wallbank – Brilliant Communications

Category: Innovation

  • Pretty shells and shiny toys

    Pretty shells and shiny toys

    “I was like a boy playing on the sea-shore, and diverting myself now and then finding a smoother pebble or a prettier shell than ordinary, whilst the great ocean of truth lay all undiscovered before me.” – Isaac Newton

    “We live in a bubble, and I don’t mean a tech bubble or a valuation bubble. I mean a bubble as in our own little world,” – Eric Shmidt

    Newton’s famous quote is one of the things that jumps out on reading the opening of Jeff Jarvis’ Private Parts, is how we live in an era of pretty shells that catch our attention and obsess some of us.

    While we play with those pretty shells, we ignore much of what is happening around us. Those glittering social media and cloud computing tools are fun to play with, but what do they really mean?

    The winners from the early stages of the industrial revolution were people like Josian Wedgwood and Robert Stephenson who saw how to apply the inventions of the time to create new products and markets, later they were followed by people like Thomas Edison, Andrew Carnegie and Henry Ford who developed the industries of the 20th Century.

    Right now, we’re making shiny trinkets out of our technology tools, Business Week’s It’s Always Sunny in Silicon Valley makes this case well and Eric Schmidt’s bubble quotation above comes from that.

    We see lots of applications for finding coffee roasters, sharing music files and plugging into the social media platform of the day; all of which are the concerns of middle class white people trying to maintain last century’s consumer society.

    Somehow we’re missing the bigger picture, but gee those sea shells are pretty.

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  • Lords of the digital manor

    Lords of the digital manor

    There is something fundamentally wrong with AOL’s media business states a Business Insider headline.

    What is fundamentally wrong is quite basic to anyone who has owned or managed a business – money.

    The problems at AOL illustrate the deep flaws in the “digital sharecropper” business model of putting free or cheap content on the web to harvest online advertising.

    Lords of the digital manor

    Sites like Demand Media and Huffington Post can’t make money from content if too many staff expect to get paid. Chris Anderson illustrated this in a rebuttal to Malcolm Gladwell where he examined the economics of his GeekDad blog and the work of its manager, Ken;

    So here’s the calculus:

    • Wired.com makes good money selling ads on GeekDad (it’s very popular with advertisers)
    • Ken gets a nominal retainer, but has also managed to parlay GeekDad into a book deal and a lifelong dream of being a writer
    • The other contributors largely write for free, although if one of their posts becomes insanely popular they’ll get a few bucks. None of them are doing it for the money, but instead for the fun, audience and satisfaction of writing about something they love and getting read by a lot of people.

    It’s almost touching to picture the modern day digital serf touching his flat cap and murmuring “thank you m’lud” on receiving a ha’penny from the lord of the digital manor before scampering back to working on becoming a well read, but unpaid writer.

    We don’t pay writers

    The business model of the Geek Dad blog or the Huffington Post relies upon these unpaid writers donating their work and time –the digital sharecroppers as described by Jeff Attwood.

    Low paid or free labour is essential to the success of these site, when the bulk of advertising income goes straight to the proprietors the digital aristocrats – Lord Chris of Wired or Duchess Arianna – can live well.

    The business model falls apart when management starts taking a cut of the profits; install a highly paid CEO and management team with their squadrons of Executive Vice Presidents or Group General Managers with the Medici-esque perks and entitlements these folk demand and the profits disappear.

    AOL’s problem is it has too many highly paid managers extracting wealth from the company’s cashflow.

    This is exactly the same problem print and television media empires have, once the rich rivers of gold allowed them to build up well paid management castes that are now crippling the businesses as revenues can’t support their financial burden.

    Paying for digital media’s future

    Over time, online media revenues are improving. As Morgan Stanley analyst Mary Meeker pointed out in 2010 that U.S. consumers spend 28 percent of their media time online, yet in 2010 only 13 percent of ad spending goes to the Internet. As advertisers follow consumers, publishing on the web will become more profitable.

    The risk for big media organisations is their money will run out before the digital renaissance arrives and when it does, they may have squandered their natural advantages by shedding quality journalists, experienced sub-editors and good editors in an effort to prop up executive bonuses.

    AOL’s management problem is part of a much bigger problem across markets and industries, we can call it managerialism – there are too many highly paid managers getting in the way of the writers, engineers, scientists, artists and tradesman who add real value to their organisations.

    Strangely, it may be Chris Anderson’s “free” model that kills the managerial culture as enterprises that can’t afford to pay product creators certainly won’t pay an Executive Vice President’s entitlements.

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  • The business of denial

    The business of denial

    Denial is a powerful sedative, it allows us to trundle dozily along a well worn patch oblivious to the reality our comfortable world has changed.

    Last week’s claim that youth is fed up with the iPhone by Nokia’s Niels Munksgaard – who has the wonderful title of Director of Portfolio, Product Marketing & Sales – is a great example of how far and how long denial can continue while there’s still money to pay executive bonuses.

    Canada’s beleaguered Research In Motion, manufacturers of the Blackberry phone, showed the same delusions when they released their Playbook tablet computer with the declaration Amateur Hour Is Over.

    The only amateur hour was in the hubristic minds of RIM’s marketing team.

    While profits keep flowing big organisation can afford delusions – Google can indulge their social media fantasies while the Adwords rivers of gold continue to flow ever faster and Microsoft can continue to indulge their delusions while their Windows and Office products remain immensely profitable.

    Microsoft’s “droidrage” campaign, designed to embarrass Google’s Android mobile phone platform, is part of that delusion; for Microsoft’s campaign to work they have to prove there is a widespread Android malware problem, show their system isn’t prone to the same flaws and – most importantly – have enough product on the market to sell to those disillusioned Google customers.

    Such a negative campaign has many fallacies – it assumes there are widespread security problems in Android, that Microsoft will pick up disaffected Google customers and there are enough Microsoft based products to grab those sales.

    Probably Microsoft’s biggest problem is the assumption that customers actually care about that stuff – for years Windows dominated its market despite being riddled with computer with security holes and malware.

    Microsoft succeeded because their competition was delusional; the best example being WordPerfect claiming graphic systems like Windows were a fad at a time when an inferior Microsoft Word was gobbling up their markets.

    By the time WordPerfect realised their error and released a truly dreadful WordPerfect for Windows it was all too late, like a stagecoach company realising the motorcar is here to stay.

    The problem for businesses in denial is that reality eventually does bite; plenty of people in the newspaper industry believed their advertising based model was secure and profitable – indeed many of the cosseted managers in that sector still believe it is – which now leaves them struggling in a changed world they thought they could ignore.

    Denial among incumbents is a great opportunity for newer, more flexible players; for years mobile phone and tablet computer manufacturers were in denial about the usuability of their product – Apple proved them wrong and now commands the most profitable chunks of those markets.

    Being the village blacksmith or a buggy whip maker was a good business to be in at the beginning of the 20th Century. Thirty years later those block boys and saddlemakers who hadn’t made the jump found themselves out of work.

    It’s going to be interesting to see will be this century’s buggy whip manufacturers.

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  • Failing our customers fast

    Failing our customers fast

    The New York Times suggests the new Amazon Kindle Fire could be the Edsel of electronic devices, Twitter’s new interface is met with dislike and accounting software company MYOB’s latest update receives a universal thumbs down.

    At a time when software tools, online publishing platforms and contract manufacturing mean we can get products quickly to market, it’s easy to get ahead of our customers and even our own quality control.

    Having the ability to get a something new out at low cost has given rise to the “fail fast” philosophy.

    While “failing fast” is changing the way industries work while giving rise to a whole new breed of innovations and entrepreneurs, we want to make sure we don’t fail our customers too badly or too often.

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  • Fading markets, falling margins

    Fading markets, falling margins

    “They don’t pay for us to go to trade shows anymore,” lamented a journalist at a recent industry PR event. The era of international trips and freebies is over for most technology journalists and its passing is mourned by many of them.

    Media junkets, industry conferences in exotic locations and management retreats to exclusive resorts are what businesses with fat profits can afford. Most of the tech industry is past that point as most of the sector becomes commoditised.

    Slowly, vendors come to understand what a commoditised market means as Acer have with their announcement they will stop selling cheap systems while others, like Apple, have managed to avoid that trap entirely.

    As technology changes, cheaper manufacturing locations appear and consumer preferences change many businesses will find their markets change. Some will identify those changes early and change course while others will wonder what has happened to their fat margins and why they can’t afford management, client or media trips to the Pacific or the South of France anymore.

    That’s good for consumers, but a terrible thing for those managers who are little better than corporate bureaucrats and their friends in the media.

    Interestingly, it’s the jobsworths and the overfed incumbents who are the slowest to recognise when their businesses are changing which is why there’s so much opportunity for smaller, smarter enterprises.

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